Addressing the Politics of Energy

“Without ample supplies of energy to defend liberty and to inspire and support innovation, a society is restricted to serfdom and barbarism; their sure destiny is third-world status.” — Anonymous

Prosperity and electricity consumption are allies. As one of the most prosperous nations in the world, our country is also among the most energy intensive, ranking seventh in per capita electricity consumption behind countries like Iceland, Norway, and Canada. In our ever-more digital world, electricity demand will continue to increase and reliability will become even more important. Missouri’s average residential electricity rates are 13th from the lowest in the United States, while overall rates are 14th from lowest. More than 80 percent of our electricity is generated by coal, which helps keep our costs low, relative to other states.

The Public Service Commission (PSC) is appointed by the governor and is responsible for establishing electricity rates for publicly owned and independently owned utilities. Municipal utility and rural electric cooperative prices are set by their own management structures. All forecasts show demand for electricity continuing to increase into the foreseeable future, eventually requiring additional generation capacity, but there is no current shortage of electricity for Missouri consumers.

Three major elements comprise the electric industry: base load generation, peak load generation, and the distribution network known as “the grid.” Since electric utilities are regulated monopolies not subject to competition, the regulators of the PSC are charged with balancing the reliability, safety, and cost of electricity. The cost of that regulation is significant and is born by electricity consumers. As a member of the Senate Commerce, Consumer Protection, Energy and the Environment Committee, one of my goals is to reduce the costs of regulation, which has a direct impact on the price of electricity.

Senate Bill 207 is designed to that end. Called an ISRS bill (Infrastructure System Replacement Surcharge), it can potentially reduce certain regulatory expenses by as much as 90 percent — savings that go directly to ratepayers. The “infrastructure” affected by SB 207 consists primarily of the electricity grid — the poles and power lines that transport power from the place of generation to your homes and businesses — and the baseload power plants. These baseload plants ensure that when you turn on the switch, there is power to your lights, furnace, or air conditioner; when new federal regulations are imposed, they must be upgraded or renovated to meet the mandates. Peak load facilities will be largely unaffected by SB 207, and no new construction or revenue generating additions are to be impacted.

Currently, a regulated utility must spend the money to maintain and upgrade infrastructure before they can apply to the PSC for approval to recover those costs from ratepayers, and that will not change. The cost of the PSC application may reach more than a million dollars, which would be billed to ratepayers. If SB 207 passes in its committee substitute form, the cost of applying to the PSC for a ruling on those infrastructure costs may drop to as little as $10,000 to $20,000. The cost of repairs will be the same with or without SB 207 and the PSC’s authority to confirm or deny the prudency of all expenses will not change. Only the cost of regulation will change, and it will go down significantly.

I wish electricity prices were not increasing, yours or mine, but I am convinced the primary driver of higher prices is Washington, D.C. We have an administration in the White House and a Department of Energy that have publicly declared their intentions to increase the price of coal generation and drive states, like Missouri, to higher cost electricity. Unreasonable regulations have virtually assured that no new coal-fired plants will be built. Plants that are more than 50 years old are being forced to undergo expensive upgrades that have no significant impact on the environment, yet cost millions of dollars, largely due to politics.

In the Missouri Senate, we will continue to do everything within our jurisdiction to reduce the costs of electricity; but, in a nation increasingly ruled by executive orders and punitive EPA regulations, it is the politics of energy, more than its generation and delivery, that drives the cost. Those telling you otherwise are either ill-informed or party to the politics.

I appreciate you reading this legislative report, and please don’t hesitate to contact my office at (573) 751-2108 if you have any questions.